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How Apple can succeed in mobile payments with NFC, iBeacon, the iPhone 6 and iWallet

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Last week, I was out with my family at an outdoor shopping center. As we walked from one set of retail stores to another, my iPhone buzzed and there on my lockscreen was a notification showing my Starbucks Card. I wasn’t in a Starbucks but instead was within sight of one I’d visited previously.

Starbucks Card balance

Next week at an Apple press event — we’ll be there with a live-blog on Tuesday — we’re very likely to hear that [company]Apple[/company] has cracked the mobile wallet challenge where so many others in the U.S. have failed. And that pop-up notification from my [company]Starbucks[/company] Card, which is also in my Apple Passbook app, got me thinking of how Apple may succeed in the wireless payment space with all of the right moving parts in place at just the right time. It could even benefit the expected iWatch launch.

NFC won’t just be an iPhone 6 solution

Let’s start with the basics: A method to use the iPhone in place of physical credit card.

All signs point to a near-field communications (NFC) chip in the next iPhone and I have little reason to doubt that. Last week, I offered two reasons that NFC in the iPhone 6 makes sense both for payments and for simple pairing of Bluetooth accessories, such as a wearable device. For many mainstream consumers, this would be new technology but of course, it’s been around for several years. That doesn’t matter to the people who’ve never used NFC in either instance; it will be a desirable, new experience.

NFC iPhone

There’s a problem though. If only the new iPhone — or iPhones, assuming two size options — have an NFC chip, how will the tens of millions of current iPhone owners be part of this new mobile payment revolution? Sure, folks can upgrade but not everyone who owns an iPhone will do so. Enter the iWatch, or whatever Apple decides to call its wearable device.

An “iWatch” could bring mobile payments to older iPhones

I’d expect the iWatch to also have NFC and not just for simple pairing to an iPhone over Bluetooth 4.0; the device could also possibly be part of the authentication process for payments since older phones don’t have Touch ID.

iwatch concept

If so, you could use the iWatch in lieu of an iPhone to pay for items in retail stores. Since the wearable device connects to an iPhone, the wallet application could work with the accessory. And guess what: Every iPhone that Apple currently sells — the iPhone 4s, 5c and 5s — supports Bluetooth 4.0, which could link NFC on the wrist and a wallet app on the phone. This not only brings a wider audience to Apple’s wireless payment implementation but also gives more people incentive to buy the iWatch: A double-win for Apple.

How iBeacon could fit in with the mobile payment experience

Going back to my Starbucks “out of store” experience — it actually did get me to go in and buy an espresso — adds another potential twist to Apple’s wallet aspirations: iBeacon. We haven’t heard much of late about the small Bluetooth devices that can pinpoint your indoor location. These launched with iOS 7 last year and some retailers have added them in the past 12 months.

The reason my iPhone surfaced my Starbucks Card last week was because it detected I was near the coffee shop. It can do this with GPS, Wi-Fi or both and it’s pretty handy. Apple can take things a step further, though, with iBeacon.


Perhaps the wallet app or Passbook pops up a coupon or other promotion when iBeacons recognize I’m actually just outside or in a store. Better yet, since iBeacons can pinpoint indoor proximity to a more precise level, my iPhone could realize when I’m in the checkout line of a store. The wallet app or store card for that particular location could magically surface just the right card so I don’t have to fumble around with a dozen piece of plastic in my physical wallet. Think of it as a contextual experience when paying: The right time, place and card.

Two things Apple has that the contenders don’t

None of this is possible without the right backing, however. And it speaks volumes to why [company]Google[/company] Wallet and the carrier payment systems — first dubbed Isis and now called Softcard — have generally been a bust. Simply put, neither have the clout that Apple has in two regards.


First, carriers have little control over Apple, or put another way: Carriers have more control over Google than they do over Apple. The U.S. network providers, for example, had little incentive to push Google Wallet when they had their own wireless payment program. That’s partly why Verizon Wireless customers couldn’t use Google Wallet with NFC or tap-to-pay services: The carrier had the power to keep Google Wallet off of phones that ran on Verizon’s network. And unlike Apple’s global aspirations, Google doesn’t even support the Wallet app on phones purchased outside of the U.S.

While it clearly has relationships with them through its Wallet app, Google likely doesn’t have the same influence over banks that Apple has either; not with Apple’s estimated 800 million iTunes accounts. So it wouldn’t be able to work favorable deals with [company]Master Card[/company], [company]Visa[/company], [company]Discover[/company] and [company]American Express[/company]. It’s been reported that Apple has been in discussion at least three of those four card providers and was able to cut deals directly with bank-card issuers; possibly getting lower transaction fees as a result. And that’s just like Apple: It will use its considerable clout to cut in on an industry and create a new revenue stream.

What’s the revenue model for Apple here?

How might this all create more revenue for Apple? I’m not yet sure but have at least one idea.

If Apple has negotiated lower rates on payment transactions, it could allow for customers to simply charge physical retail items through their iTunes account. With the savings on transaction processing, Apple could offer incentives for shopping in the iTunes Store. Charge your groceries to your Master Card through the iPhone, for example, and get a few dollars off the next time you buy something from iTunes. That would bring more customers to Apple’s store and perhaps get them to spend more.


Perhaps that’s too complex of a solution though and Apple simply gets a small cut of every transaction charged through an iPhone or iWatch. That’s how Apple makes its money now from the sale of music, video and apps and is the more likely scenario.

Regardless of how this all pans out next week, it’s clear to me that out of everyone in the mobile industry, only Apple currently has all of the pieces of the mobile payment puzzle for a chance of success. It’s not just the clout of Apple, the devices, and the software to pull this off. It’s the combination and control of these things that no other company can currently offer.


16 Responses to “How Apple can succeed in mobile payments with NFC, iBeacon, the iPhone 6 and iWallet”

  1. Jamie Harper

    What do you think Samsung lacks in this picture? (Genuinely – I’m not aware of any deficiency in their stack re: NFC)… i.e. Surely Samsung have not only got everything Apple has, but also several years of hardware support/fault/manufacturing experience on top – something which Apple lacks currently?

    Apple was slow to realise NFC, opting instead to take the Bluetooth 4.0 route. Now that they’re on that path, to return to NFC (inductive application) seems a little inefficient.

    Yes – NFC makes good sense as a proximity technology (typically demanding a <5cm proximity) but soon tech will be commonplace that recognises the user (iris, gait, physical characteristics) so need for NFC or iBeacon for payments should be moot… So to implement NFC now is a bizarre shift.

    Apple adopting NFC makes very little sense unless they have a software kicker – something in mind that utilises a new UX or mechanism for doing something that requires a <5cm distance. Apple's *real* advantage – and how they win so many fights – is that they dominate the market for uniquely thrilling/exciting user experiences. Sexy transitions, gorgeous physics in menu movements/fade out visuals etc and taking the user out of their dreary environment for a few beautiful seconds is what Apple do better than all others.

    Apple making payments sexy is where they will make their play / take a lead, and if they want to change minds on NFC – their marketing spend is going to be eye-wateringly large (think signeage/media *everywhere* to make you feel special paying by iPhone/iWatch)…

  2. Really puzzled why media keeps focusing on elements of mobile payments that others have tried before but ignore they key thing that Apple lacks, financial services and risk management experience. Just processing the transactions for the credit card companies is hardly a game changer.

  3. brendancoots

    Interesting thought on the iWatch being a gateway to mobile payments for older devices, but I suspect that would only reach as far back as the 5s and 5c. The 4s doesn’t have Touch ID, which is almost certainly a critical security component of Apple’s forthcoming payment solution.

  4. John Trustworthy

    Hold on.. wasn’t Apple who was making fun out of NFC and Google’s approach with Android? Now they are supposed to be THE company to implement it?

    Add their horrible security as we have witnessed plenty of times (with the latest iCloud breach), I’m not sure who would be insane enough to trust them with anything payments wise.

    If ANYONE can do NFC right it will be Google, not Apple, especially since Google has been working on NFC and making sure support is top notch on Android from day one.

  5. Cold Water

    I don’t know why you’d buy a first-generation iWatch to get some of the iPhone 6 features. For a few bucks more, an early upgrade gets you all of the features *and* a new phone.

  6. If my phone buzzed because I was near that store paid for an advertisement like this I would be beyond furious. Advertisements are out of control. I’m already furious that in Apples privacy policy they consider your location and unique device identifier as non private data.

    • Cold Water

      iBeacons will only tag you if you have the app installed (and presumably allow them). It’s kind of like an opt-in to the retailer’s email newsletter, but only when you need it.

      I’m still not that enthused.

      • Yep that’s right. And if people are paranoid about Google getting data about them and tracking them, what about Apple and iBeacons that can track you and your purchasing decisions right down to the foot?